10-QPeriod: Q3 FY2009

MCDONALDS CORP Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 5, 2009For Securities:MCD

Summary

McDonald's Corporation reported its third quarter and nine-month results for the period ending September 30, 2009. The company demonstrated resilience in a challenging economic environment, with notable growth in operating income, particularly in constant currency terms. Total revenues saw a slight decline on a reported basis but increased when excluding currency fluctuations, driven by positive comparable sales across all segments. Profitability remained strong, with net income and diluted earnings per share showing year-over-year increases for both the quarter and the nine-month period. The company continued its commitment to returning value to shareholders through significant share repurchases and dividend payments, including a 10% increase in the quarterly dividend. McDonald's is actively managing its restaurant portfolio through a refranchising strategy, which impacts consolidated revenues but is intended to optimize cash flow and returns. The company's outlook suggests continued focus on comparable sales growth and disciplined cost management.

Financial Highlights

47 data points
Beta

Revenue

$6.05B

Net Income

$1.26B

20.9% Net Margin

EPS (Diluted)

$1.15

Total Assets

$30.07B

Cash & Equivalents

$2.20B

Free Cash Flow

$1.35B

Financial Statements
Beta
Revenue$6.05B
SG&A Expenses$549.60M
Operating Expenses$4.11B
Operating Income$1.93B
Interest Expense$117.80M
Net Income$1.26B
EPS (Basic)$1.16
EPS (Diluted)$1.15
Shares Outstanding (Basic)1.08B
Shares Outstanding (Diluted)1.10B

Key Highlights

  • 1Consolidated operating income increased 6% (11% in constant currencies) for the quarter and 1% (9% in constant currencies) for the nine months.
  • 2Net income increased by 6% to $1,261.0 million for the quarter and remained flat at $3,334.2 million for the nine months, with diluted EPS up to $1.15 and $3.00, respectively.
  • 3Global comparable sales increased 3.8% for the quarter and 4.3% for the nine months, indicating continued customer traffic and spending.
  • 4The company repurchased $758.6 million in shares during Q3 2009, totaling $2.4 billion for the nine months, and increased its quarterly dividend by 10% to $0.55 per share.
  • 5Revenues saw a reported decrease of 4% for the quarter and 7% for the nine months, primarily due to the refranchising strategy, but increased 2% and 3% in constant currencies, respectively.
  • 6Operating income in the APMEA segment showed strong growth of 19% (21% in constant currencies) for the quarter and 13% (21% in constant currencies) for the nine months.
  • 7The company is on track to return between $15 billion and $17 billion to shareholders over a three-year period ending in 2009.

Frequently Asked Questions

McDonald's demonstrated resilience despite the economic downturn. While reported revenues decreased due to a strategic refranchising initiative, sales in constant currencies saw growth, driven by positive comparable sales across all geographic segments. The company also managed to increase operating income and net income, highlighting effective cost management and strong brand performance in value-conscious markets.

The refranchising strategy involves shifting from company-operated to franchised restaurants. This strategy negatively impacts consolidated revenues because company-operated sales are replaced by royalty and rent income, which is generally lower on a per-restaurant basis. However, it is intended to optimize cash flow, improve returns on investment, and potentially increase overall profitability in the long run by leveraging franchisee capital and focus.

McDonald's is actively returning value through a combination of share repurchases and dividend payments. In the first nine months of 2009, the company returned $4.0 billion to shareholders via these methods. They also announced a 10% increase in their quarterly dividend, demonstrating confidence in their financial position and commitment to shareholder returns.

McDonald's expects continued systemwide sales growth driven by comparable sales and net restaurant expansion. They anticipate commodity costs to rise moderately and are focused on managing selling, general, and administrative expenses. The company also anticipates interest expense to decrease. Foreign currency fluctuations remain a factor, but the company employs hedging strategies to mitigate risk.